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Archive for February, 2021

Eleventh Circuit Denies Article III Standing Based on Future Harm from Data Breach

Posted on: February 26th, 2021

By: Matt Foree

The United States Court of Appeals for the Eleventh Circuit recently held that future harm from a data breach does not provide Article III standing to a plaintiff. By doing so, the Eleventh Circuit weighed in on the ongoing debate among the circuit courts. The case is Tsao v. Captiva MVP Rest. Partners, LLC, which can be found here

In Tsao, the plaintiff raised claims individually and on behalf of a class against a restaurant following a data breach that exposed the restaurant’s customers’ personal financial information. The case dealt with the concept of Article III standing, which concerns a person’s ability to file suit in federal court. Under Article III of the Constitution, the jurisdiction of a federal court is limited to cases and controversies. To satisfy the case or controversy requirement, a plaintiff must have standing to sue. For a plaintiff to have standing, he must have suffered an injury in fact, that is fairly traceable to the challenged conduct of the defendant, and that is likely to be redressed by a favorable judicial decision. 

The plaintiff in Tsao did not allege injury based on misuse of personal information or based on identity theft occurring as a result of the data breach. Instead, he raised two general theories of standing. First, he argued that he could suffer future injury from misuse of the personal information disclosed during the cyber-attack, even though he had not yet, and that this risk of misuse alone was enough to satisfy the standing requirement. Then he argued that he has already suffered some concrete, particularized mitigation injuries including lost time, lost rewards points, and loss of access to accounts, that are sufficient to confer standing.

As part of its analysis, the Eleventh Circuit considered recent case law and distilled two legal principles relevant to the plaintiff’s claims. First, it determined that a plaintiff alleging a threat of harm does not have Article III standing unless the hypothetical harm alleged is either certainly impending or there is a substantial risk of such harm. Second, if the hypothetical harm alleged is not certainly impending or if there is not a substantial risk of the harm, a plaintiff cannot conjure standing by inflicting some direct harm on himself to mitigate a perceived risk. 

With these principles in mind, the Eleventh Circuit began by considering plaintiff’s theory that he had Article III standing because he faced a substantial risk of identity theft, fraud, and other harm in the future as a result of the data breach. The Eleventh Circuit considered the opinions of its sister circuits, which are divided. It recognized that on the one hand, the Sixth, Seventh, Ninth, and D.C. Circuits have all recognized at the pleading stage that a plaintiff can establish injury in fact based on the increased risk of identity theft. On the other hand, it recognized that the Second, Third, Fourth, and Eighth Circuits have declined to find standing on that theory.

After considering the decisions of its sister circuits, the Eleventh Circuit determined that plaintiff did not meet his burden to show that there was a substantial risk of harm or that such harm is certainly impending. As part of its decision, it underscored three key considerations. First, it recognized that it recently held that conclusory allegations of an elevated risk of identity theft are not enough to confer standing. Second, it held that the plaintiff only offered vague, conclusory allegations that members of the class suffered a debt and actual misuse of their personal data, i.e., unauthorized charges, but conclusory allegations of injury were not enough to confer standing. Finally, plaintiff canceled his credit cards following disclosure of the breach, effectively eliminating the risk of credit card fraud in the future. Therefore, the Eleventh Circuit determined that evidence of a mere data breach does not, standing alone, satisfy the requirements of Article III standing, such that it follows that plaintiff did not have standing based on an increased risk of identity theft.

The Eleventh Circuit then turned to plaintiff’s claim that he suffered actual, present injuries in his efforts to mitigate the risk of identity theft caused by the data breach. It determined that it is well established that plaintiffs cannot manufacture standing merely by inflicting harm on themselves based on their fears of hypothetical future harm that is not certainly impending. It determined that the mitigation costs plaintiff alleged are inextricably tied to his perception of the actual risk of identity theft following the data breach. Therefore, it found that plaintiff could not conjure standing by inflicting injuries on himself to avoid an insubstantial, non-eminent risk of identity theft. 

In sum, the Eleventh Circuit held that plaintiff lacked Article III standing because he could not demonstrate a substantial risk of future identity theft or that identity theft is certainly impending and also because he could not manufacture standing by in current cost and anticipation of non-eminent harm.  By doing so, the court upheld the dismissal of plaintiff’s claims.  Importantly, this decision contributes to the disagreement among the circuit courts as to whether future harm resulting from a data breach can form the basis of a lawsuit in federal court.

If you have questions or would like more information, please contact Matt Foree at [email protected].

Should Employees’ Workplace Exposure to COVID-19 Lead to Liability of Employers to Families and Others? The Northern District of California Says “No.”

Posted on: February 25th, 2021

By: Jennifer Markowski, R. Victoria Fuller and Kevin Kenneally

A year into the pandemic, the legal landscape facing employers arising out of the COVID-19 continues evolving. In a recent federal case in California, the Court was asked to consider whether employers could be held liable to family members and others who contract COVID-19 from employees infected in the workplace. In Kuciemba et al v. Victory Woodworks, Inc., 3:20-cv-09355-JCS (N.D. Cal. 2020), the plaintiffs allege that the husband’s employer is liable to the wife for physical injury caused by her COVID-19 infection and subsequent hospitalization. Although the husband’s claim for occupational exposure to COVID-19 is unquestionably prohibited by the workers’ compensation exclusivity bar, the question presented in Kuciemba was whether the wife’s claims were similarly barred.   

The employer raised solid arguments that a family member cannot recover for derivative claims arising from the worker’s occupational injury or illness. More specifically, in its motion to dismiss, the employer analogizes the wife’s claims to a spousal claim for negligent infliction of distress, which the California Court of Appeals had previously held was prohibited by the exclusivity bar because it was derivative of the employee’s work-related injury.

The plaintiff, on the other hand, argued that the injury at issue was not derivative of the spouse’s occupational injury, but instead the illness from COVID-19 is a separate, direct injury caused by negligence of the defendant company in protocols in the workplace that exposed her and others to harm and is therefore not barred by the workers compensation laws. The plaintiff also argued that established California law recognizes a duty on the part of employers to protect employees’ families from workplace exposure to pathogens.  The plaintiff relied on precedent in which a daughter was permitted to assert a claim against an employer for physical injury from exposure to carbon monoxide caused by her mother’s occupational exposure while pregnant with the daughter. The plaintiff also analogized the employer’s liability to household members to prevent COVID-19 infection to recognized causes of action in other toxic tort claims. For instance, it is a frequently-litigated claim in asbestos matters whether a workplace exercised reasonable care to prevent transmission of asbestos to an employee’s household members, often by asbestos fibers on work clothes brought home to be laundered, which is an actionable claim recognized by the California Supreme Court.

The U.S. District Court for the Northern District of California, however, decided this week that the wife’s claims are barred by the workers’ compensation statute’s exclusivity provision.

Given the endless opportunities for exposure to COVID-19 from employees to family members, similar suits are likely to follow in other jurisdictions.  As vaccines are becoming available to certain sectors of the workforce, employers should continue to ensure that they are appropriately following and enforcing all applicable federal, state, and local health and safety guidelines and determine if mandatory vaccination programs are advisable for its workforce.  If a court should decide that the workers’ compensation exclusivity bar is not applicable to such claims by family members and others, it could lead to wide-ranging exposure for an employer to civil litigation and possible tort liability to claimants who never entered the business premises. 

If you have questions or would like more information, please contact Jennifer Markowski at [email protected], R. Victoria Fuller at [email protected], Kevin Kenneally at [email protected].

Additional Information:

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you. We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Ban on Noncompete Agreements: A Growing Trend?

Posted on: February 22nd, 2021

By: Amy C. Bender

In an effort to protect valuable customers, confidential and proprietary information, and investment in personnel, employers often require noncompete agreements that limit an individual’s ability to engage in competing services during and after employment. There is no national standard governing noncompete agreements; rather, each state has its own laws on the extent to which such agreements may be used or enforced.

Recently, some states have narrowed the circumstances in which these agreements may be used.  For example, some jurisdictions now limit the category of employees who lawfully may be subject to a noncompete agreement (such as only managers and sales employees). Washington, D.C. has just become the latest U.S. jurisdiction to ban noncompete agreements altogether (except in extremely limited circumstances, such as in connection with the sale of a business), joining California, North Dakota, and Oklahoma. With the increasingly remote workforce (particularly due to the COVID-19 pandemic), employers seeking to protect their confidential information and human resource investments must review the laws not only of the states where they operate, but also those of the states where their employees are located. 

Even in states where noncompete agreements are limited or prohibited, employers typically have other avenues to protect their legitimate business interests, such as bans on workers using or disclosing confidential information and soliciting the employer’s customers or employees. Employers should consider implementing these measures in addition to, or instead of (if needed), noncompete agreements.

FMG’s Labor and Employment Law team can assist your organization with drafting or enforcing a noncompete agreement, evaluating whether your potential new hire’s agreement is enforceable, and discussing other protective measures. For more information, contact Amy Bender at [email protected].  

Employer’s Prohibition of Black Lives Matter Attire Insufficient Basis for Discrimination and Retaliation Claims

Posted on: February 18th, 2021

By: Jennifer Markowski and Jennawe Hughes

The federal lawsuit filed by employees of Whole Foods Market, Inc. (“Whole Foods”) and Amazon.com, Inc. (“Amazon”) who were prohibited from wearing Black Lives Matter (“BLM”) attire, was dealt a significant blow when a Massachusetts federal judge dismissed the majority of the case finding all but one employee had failed to allege facts sufficient to survive a Rule 12(b)(6) challenge.

In the summer of 2020, numerous Whole Foods employees began wearing face masks and other attire with BLM messaging. In July, twenty-eight current and former employees asserted claims of race discrimination and retaliation under Title VII of the Civil Rights Act of 1964 (“Title VII”) after being told they could not wear the BLM attire per company dress code policy (the “Policy”) and were disciplined when they refused to abide by the Policy. Employees claimed that the Policy was selectively enforced in that LGBTQ and National Rifle Association messaging had previously been permitted and that such selective enforcement was discriminatory. They further contended that disciplinary measures taken for refusing to adhere to the Policy was retaliatory.

Judge Allison Burroughs found the employees did not adequately assert a Title VII violation because the facts alleged did not support a finding that employees were treated differently on the basis of their race as all employees, irrespective of their race, were prohibited from wearing attire with BLM messaging. Judge Burroughs noted “inconsistent enforcement of a dress code does not constitute a Title VII violation because it is not race-based discrimination and because Title VII does not protect free speech in a private workplace.” The associational discrimination claims similarly failed because there were no allegations supporting a finding that the employees had been “discriminated against on the basis of race, rather than on the basis of race-related messaging.”

With regard to retaliation, the claims of all but one employee who engaged in protected activity, including filing a charge with the EEOC prior to her termination, were dismissed. Judge Burroughs held that wearing BLM attire was not a protected activity as it was not done to oppose an unlawful employment practice, but rather to make a broader social statement. Absent a protected activity, any disciplinary action could not be unlawful retaliation. In reaching her decision, Judge Burroughs pointedly remarked “Whole Foods employees that are not happy with the Policy can find someplace else to work, express themselves outside the workplace, work with Whole Foods to change the Policy, and/or publicize the Policy in an effort to get consumers to spend their dollars elsewhere, but, under the facts alleged here, their redress does not lie with Title VII.”

Although the bulk of the claims were dismissed, this case nonetheless serves as a reminder to employers that selective enforcement of uniform policies can be risky and open the door to a lawsuit and potential liability. It also highlights the importance of ensuring dress code policies are facially neutral.

For more information, please contact Jennifer Markowski [email protected] and Jennawe Hughes at [email protected].

California’s Expedited Procedure to Expunge Mechanic’s Liens

Posted on: February 17th, 2021

By: Ken Coronel

A common, current instruction from client to lawyer: Get those mechanic’s liens off my property! In our present economic environment there are plenty of reasons why property owners need to keep their real property free of encumbrances. Unfortunately, it seems that more often than not, property owners find themselves in disputes with their contractors. The owner may withhold payment for work not completed or improperly done, while the contractor retaliates by recording a mechanic’s lien against the owner’s property.

If the mechanic’s lien has become stale, it is subject to being expunged on an expedited basis following the filing of a petition to expunge (invalidate) the lien. The lien becomes stale if a lawsuit is not filed to foreclose it within 90 days of the recording of the lien. Civil Code section 8460. In that event, under section 8480, the owner may petition the court for an order to release the property.

In terms of process, it starts when the owner gives the contractor a required written demand to remove the lien and send it per one of the prescribed service methods. The owner must then wait ten days before filing the petition. The owner should obtain a certified copy of the claim of lien as that will need to be attached to the petition.

When the petition is filed, it must be set for hearing by the court clerk within 30 days of being filed. The court may continue the hearing on a showing of good cause, but the court is required to rule and make any necessary orders on the petition not later than 60 days after the filing of the petition.

One question about the statute is whether it can also be used to expunge liens which are facially invalid due to another reason, e.g., the contractor is not licensed. The statute is limited in its language to stale claims, but on the one occasion this author asked the court to invalidate a lien that was clearly invalid for other reasons and the court obliged. I have known other attorneys to prevail on these motions, as well.

Finally, one other aspect of this procedure which is attractive to owners: the prevailing party is entitled to reasonable attorney’s fees. Civil Code section 8488.

For more information, please contact Ken Coronel at [email protected].